Why does and LEI need to be renewed?
The Global LEI System (GLEIS) was established in 2011 to ensure that we do not experience another financial crisis like the one in 2008. The new system is more transparent, and as part of it, each business has a Legal Entity Identifier (LEI) code which helps to identify market participants globally.
This LEI database, consisting of all LEI records, is a free tool that anyone can access. The LEI record contains public information such as name, address, and where the organization is registered, helping to assure consumers that the entity they are dealing with is legitimate.
When should you renew an LEI?
Each year, businesses are required to renew their LEI registration. This is required to ensure that information is of the highest standard and reliability. All renewal information is inputted into the database to provide updated information that is accessible.
Businesses must renew their LEI code precisely one year after their initial registration and continue to do so at the same time each successive year.
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What happens if you don't renew the LEI registration?
There are rigorous standards related to renewals. GLEIS takes registration and renewals quite seriously. Companies that fail to update and renew registration will default to inactive status, and their LEI will appear as “Lapsed.”
This may not seem like a big deal to some, but consider that the vast majority of organizations conduct business globally. Failure to register or renew your LEI can deny you access to the global market and therefore hamper your ability to do business.
This may seem like a strict punishment for failure to renew, but the goal is to protect the financial systems from a catastrophic event. Thus, businesses are expected to meet the standards set by the Global Legal Entity Identifier Foundation (GLEIF).
Register an LEI for multiple years
One of the things that the registration agents did to help businesses was to allow for multiyear renewals. The annual renewal can become tedious, especially when managing multiple LEI codes.
In response, a three- or five-year registration period was created. This helps avoid any lapses while ensuring that information is constantly maintained. Of course, if a business changes any of its information during the multiyear period, it is expected to update this as quickly as possible.
